As of January 1, the process of filing a claim against a residential contractor license bond now also includes a mediation process

As of January 1, 2017, new rules regarding the contractor license bond claim process in Oregon have been put in place. These rules only apply to bond claims brought against residential contractors.

Under the new rules, the Oregon Construction Contractors Board (CCB) will first attempt to mediate the situation that has given rise to a complaint before letting claimants file a formal claim against the bond. Read on for a full overview of the new rules regarding filing a contractor license bond claim in Oregon.

The Oregon residential contractor license bond

According to Section 701.145 of the Oregon Revised Statutes (ORS), residential contractors are required to obtain a contractor license bond when applying for their license. Current state law requires residential contractors to obtain bonds in the following amounts, depending on the type of license they obtain:

$20,000 bond for residential general contractors and residential developers;

The purpose of contractor license bonds is to offer protection to the Construction Contractors Board as well as to the clients of a contractor. The protection is provided in cases when a contractor violates Oregon contractor regulations and laws and causes damages or losses. This may include defaulting on a contract, not complying with the conditions of a contract or simply doing a bad job.

In the case of a violation, a contractor license bond claim can be made. Once the claim is investigated by the CCB and the surety company and is deemed within the scope of the bond, compensation is paid to claimants.

But as of January 1 the process of filing a contractor license bond claim against residential contractors in Oregon has been amended.

In order to protect contractors from surety bond claims that may not be within the scope of the law as well as to assist the process of resolving complaints, House Bill 4121 introduced changes to the ORS.

Previously, a complaint had to be filed against a contractor, and the CCB would then investigate the complaint and either give rise to a claim against the contractor’s bond or recommend various actions to the contractor in order to resolve the situation.

According to Section 8.4 of Bill 4121, as of January 1, the process of filing a claim against a residential contractor license bond now also includes a mediation process. Once the Board receives a complaint against a contractor, it will investigate whether it has jurisdiction over the complaint.

The Board will then try to conduct meetings either on-site or per telephone to mediate the dispute between the complainant and the contractor. As previously, the Board may still suggest actions to the contractor that may compensate the complainant, without giving rise to a claim against the bond. According to the Bill, if a contractor takes the Board’s suggestions into consideration that is sure to influence any subsequent disciplinary proceedings that the Board may bring against the contractor.

Section 8.5 of the Bill specifies that only if the contractor and the complainant do not reach an agreement about resolving the complaint, does the complainant have a right to receive payment under a bond. The complainant must then:

Get a final judgment against the contractor by a court; or

Get an arbitration award against the contractor, reduced to a final judgment by a court.

When this occurs, the surety is notified by the Board of the final judgment as well as of the amount it must pay according to the Board.

It’s important to note that these changes to the contractor license bond claim process do not concern complaints filed under ORS 701.140 (4). Such complaints are related to the payments of wages for labor or employee benefits. These types of complaints do not go through a process of mediation but are instead immediately addressed through a court that issues a judgment.

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Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps mortgage brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.

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